Archive:Sector accounts

Data extracted in September 2016. Most recent data: Further Eurostat information, Main tables and Database. Planned article update: June 2017.

Economic developments in production, income generation and (re)distribution, consumption and investment may be better understood when analysed by institutional sector. In particular, the European Union’s (EU) sector accounts provide several key indicators for households and non-financial corporations, like the household saving rate and business profit share

The analysis in this article focuses on a selection of indicators from the wealth of sector accounts data that are collected by Eurostat. Households’ behaviour is described through indicators covering saving and investment rates, as well as debt-to-income and net financial wealth-to-income ratios. The analysis of non-financial corporations is based on the business investment rate and their profit share.

Main statistical findings

Households (including non-profit institutions serving households)

Savings rate

Table 1 shows that the household saving rate in 2014 was 2.2 percentage points higher in the 19 member euro area (EA-19; 12.5 %) than in the EU-28 (10.3 %). This gap is, at least in part, explained by the relatively high saving rates in Germany (16.9 %), Slovenia and France (both 14.1 %).

Among the EU Member States within the euro area (no data available for Greece, Luxembourg and Malta), seven had household saving rates that were higher than the EU-28 average (Germany, Slovenia, France, Austria, the Netherlands, Belgium and Italy) and the remaining nine below. The highest household saving rate among those EU Member States not in the euro area (and for which data were available at the time of writing) was recorded in Sweden (17.7 %) which was in fact the highest saving rate among all EU Member States (see Figure 1); an even higher rate was recorded in Switzerland (23.3 %, 2013 data). By contrast, the household saving rate was negative in Bulgaria (-0.2 %, 2013 data), Latvia (-0.8 %) and Cyprus (-10.8 %).

By far the largest reduction in the rate of savings between 2013 and 2014 (among those EU Member States for which data are available) was observed in Cyprus (-6.7 percentage points), while the largest increase was recorded in Latvia (2.3 points). Changes in the other Member States ranged from a decrease of 3.5 points in Denmark to an increase of 0.9 points for Slovakia, the Czech Republic and Hungary.

Household investment rate

In 2014, the household investment rate was 8.0 % in the EU-28 (see Figure 2). This rate ranged (among the 23 EU Member States for which data are available) from 9.9 % in Belgium and Finland and 9.7 % in Germany to just over 4.0 % in Portugal and Latvia and down to 2.5 % in Bulgaria (2013 data).

The household investment rate was marginally higher in 2014 than in 2013 in the EU-28, up 0.2 percentage points, while in the euro area it was unchanged. Among the EU Member States, the changes in this rate were relatively small, ranging from -0.6 percentage points in Cyprus to increases of 0.5 points in Belgium and Lithuania, aside from increases of 0.6 points in the United Kingdom and 1.0 points in the Netherlands and Ireland that were above this range.

Household debt-to-income ratio

In 2014, the household debt-to-income ratio in the euro area was 94.7 % (no data available for the EU-28). This ratio varied considerably between EU Member States (data were available for 23 EU Member States at the time of writing). While it was below 50.0 % in Lithuania, Bulgaria (2013 data), Latvia, Slovenia and Hungary, it exceeded 200 % in Denmark, the Netherlands and Cyprus; a rate of 200 % indicates that it would take two years of disposable income for households to repay their debts. It should be borne in mind that high household debt may to some extent mirror high levels of financial assets, as shown in the analysis of the household net financial wealth-to-income ratio. It may also mirror the ownership of non-financial assets, such as dwellings, or be impacted by national provisions that foster borrowing (for example, the deduction of interest from taxes).

In 2014, the household debt-to-income ratio decreased (compared with 2013) by 0.8 percentage points in the euro area. By far the largest fall in this ratio was observed in Ireland (-16.5 points), with falls of 5.0 points or more also recorded in Spain and Latvia. By contrast, among the EU Member States for which data are available, the largest increases in this ratio were in Cyprus (10.7 points) and Denmark (9.9 points).

Household net financial wealth-to-income ratio

Net financial wealth was equivalent to 247.8 % of household income in the EU-28 in 2014, while in the euro area the ratio was somewhat lower at 222.0 % (see Figure 3). Like the debt-to-income ratio, the household net financial wealth-to-income ratio differed considerably between EU Member States. Belgium, the Netherlands, the United Kingdom, Sweden and Denmark recorded the highest ratios in 2014, all over 300 %, and relatively high values were also observed in Italy, Cyprus, France, Austria and Ireland (all within the range of 200–300 %); the two non-member countries shown in Figure 3 —Iceland and Switzerland (2013 data) — also reported relatively high net financial wealth-to-income ratios. Poland, Lithuania and Slovakia were the only EU Member States (for which data are available) to record net financial wealth-to-income ratios that were below 100 %.

In 2014, the household net financial wealth-to-income ratio increased (compared with 2013) in the EU-28 by 20.2 percentage points, with the increase in the euro area a little more than half this level (10.4 points). The ratio of household net financial wealth-to-income rose rapidly in 2014 in the Netherlands (up 70.9 percentage points), Denmark (49.0 points), the United Kingdom (43.0 points), Sweden (38.1 points), Latvia (34.7 points) and Ireland (34.0 points), while double-digit increases were also recorded in Hungary, Estonia and Belgium. Among the 22 EU Member States for which data are available, this ratio only decreased in Lithuania, where a relatively small fall of 0.9 percentage points was recorded.

Non-financial corporations

Business investment rate

Table 2 shows that the business investment rate (for non-financial corporations) in 2014 was 21.7 % in both the EU-28 and the euro area. Between 2013 and 2014, the business investment rate increased in both of these areas by 0.3 percentage points. Among the EU Member States (for which data are available), this rate fell in a small minority, most notably in Cyprus (-3.5 percentage points), Slovenia (-2.0 points), Estonia, Romania and the Czech Republic (all -1.9 points). The highest increases in the business investment rate in 2014 were recorded in Ireland (up 2.5 percentage points), Sweden (1.6 points), Spain and Belgium (both 1.5 points).

The highest business investment rates among the 26 EU Member States (for which data are available) were recorded in Bulgaria (2013 data), the Czech Republic, Romania, Slovakia, Sweden, Spain, Latvia, Croatia, Belgium, Estonia and Austria, all above 25.0 %; this was also the case in Switzerland (2013 data). The lowest rates were recorded in Greece (15.1 %) and Cyprus (10.5 %). The business investment rates of the five largest EU-28 economies varied quite considerably: in Spain (26.7 %) and France (22.8 %) the latest rates for 2014 were clearly above the EU-28 average, while in Germany (19.7 %), Italy (18.7 %) and the United Kingdom (16.7 %) they were clearly below the EU-28 average (see Figure 4).

Profit share of non-financial corporations

The profit share of non-financial corporations was 39.3 % in the EU-28 in 2014 and 0.5 percentage points higher for the euro area. The lowest profit shares among the 27 EU Member States for which data are available were recorded in Croatia (29.7 %) and France (30.4 %), while profit shares above 50.0 % were posted in Poland, the Czech Republic, Slovakia, Malta, Greece, Lithuania and Romania, while in Ireland the share rose to a high of 60.7 %.

The profit share was unchanged in the EU-28 and the euro area between 2013 and 2014. The Czech Republic, the United Kingdom and Hungary recorded the highest percentage point increases between 2013 and 2014, up by more than 1.0 percentage points, while Slovenia, Malta, Poland, Sweden, Belgium, France and Finland were the only other EU Member States to record an increase in their respective profit shares between 2013 and 2014. By contrast, among those EU Member States for which data are available, a total of 15 experienced a reduction in their profit shares in 2014, most notably Greece (-4.0 percentage points), Latvia (-3.1 points) and Croatia (-2.2 points).

Data sources and availability

Following international agreement on an updated version of the worldwide guidelines for national accounts (SNA) in 2008, an update of the European system of national and regional accounts (ESA 2010) was adopted in May 2013 and implemented from September 2014. ESA 2010 replaced ESA 95 and provides a new and internationally compatible accounting framework for a systematic and detailed description of economic activity in the EU Member States and their regions. For more information on the transition to ESA 2010 please refer to a background article on this subject. For a detailed description on the effects of the implementation of ESA 2010 on European sector accounts please refer to an article on this subject, see pages 20–24 in EURONA (2/2014).

Sector accounts group together economic subjects with similar behaviour into institutional sectors, such as: households, non-financial corporations, financial corporations and government. Grouping economic subjects in this way can help to understand the functioning of the economy; the behaviour of households and non-financial corporations is particularly relevant in this respect.

The household sector covers individuals or groups of individuals acting as consumers and entrepreneurs provided, in the latter case, that their activities as market producers are not carried out by separate entities. For the purpose of the analysis within this article, this sector has been merged with the relatively small sector of non-profit institutions serving households (for example, associations and charities).

Non-financial corporations cover enterprises whose principal activity is the production of goods and non-financial services to be sold on the market. It includes incorporated enterprises, but also unincorporated enterprises as long as they keep a complete set of accounts and have an economic and financial behaviour which is similar to that of corporations. Small businesses (such as sole traders and entrepreneurs operating on their own) are recorded under the household sector.

Sector accounts record, in principle, every transaction between economic subjects during a certain period and can also be used to show the opening and closing stocks of financial assets and liabilities in financial balance sheets. These transactions are grouped into various categories that have a distinct economic meaning, such as the compensation of employees (comprising wages and salaries, before taxes and social contributions are deducted, and social contributions paid by employers). In turn, these categories of transactions are shown in a sequence of accounts, each of which covers a specific economic process. This ranges from production, income generation and income (re)distribution, through the use of income, for consumption and saving, and investment, as shown in the capital account, to financial transactions such as borrowing and lending. Each non-financial transaction is recorded as an increase in the resources of a certain sector and an increase in the uses of another sector. For instance, the resources side of the interest transaction category records the amounts of interest receivable by different sectors of the economy, whereas the uses side shows interest payable. For each type of transaction, total resources of all sectors and the rest of the world equal total uses. Each account leads to a meaningful balancing item, the value of which equals total resources minus total uses. Typically, such balancing items, such as GDP or net saving, are important economic indicators; they are carried over to the next account.

Context

Since the beginning of the economic and monetary union (EMU) in 1999, the European Central Bank (ECB) has been one of the main users of national accounts. A large number of monetary and financial indicators are evaluated in relation to other relevant data that allow the combination of monetary, financial and economic analysis, for example, key national accounts aggregates and sector accounts. In this way monetary and financial indicators can be analysed within the context of the rest of the economy.

Financial institutions’ interest in national accounts may range from a broad analysis of the economy to specific information concerning savings, investment or debt among households, non-financial corporations or other institutional sectors.

Further Eurostat information

Main Tables

Annual sector accounts (t_nasa), see:

Household saving rate (tsdec240)

Household investment rate (tec00098)

Gross debt-to-income ratio of households (tec00104)

Investment rate of non-financial corporations (tec00099)

Profit share of non-financial corporations (tec00100)

Database

Annual sector accounts (ESA 2010) (nasa_10), see:

Key indicators (nasa_10_ki)

Non-financial transactions (nasa_10_nf_tr)

Financial flows and stocks (nasa_10_f)

Financial balance sheets (nasa_10_f_bs)

Financial transactions (nasa_10_f_tr)

Revaluation account (nasa_10_f_gl)

Other changes in volume (nasa_10_f_oc)

Other information